In this case, the courts found that the services provided to horse owners (such as providing horses with hay which was grown on the land and removing horse manure from fields, daily health checks of each horse, worming, etc.), in addition to the provision of land for grazing and stabling purposes, were sufficient for Business Property Relief (“BPR”) to be available. Consequently, this allowed part of the estate to benefit from 100% relief from inheritance tax.

However, an appeal against this decision was made by HMRC to the Upper Tribunal. Amongst other points, HMRC argued that if comparable services and accommodation had been provided to humans, they would have been viewed as holding investments. HMRC also claimed that the FTT misinterpreted the law in the way that their test regarding holding investments was framed and the case of Pawson (2013) was not followed.

This appeal by HMRC was dismissed by the Upper Tribunal. The judges did not agree that the livery was an investment in land, as opposed to a business which offered its services first and foremost. They also asserted that it should not be assumed that a business which exploits land is wholly or mainly a business of investment, unless proved otherwise. Indeed, the tribunal stated “There is no clear bright line between businesses which qualify for the relief and those that do not. We are satisfied that the first tier tribunal applied the correct legal test and that the conclusion it reached was one which it is entitled to reach on the evidence before it.”

Decisions that are made by the Upper Tribunal form precedents and therefore this decision can now be followed by judges in future BPR cases.

What is BPR?

Business Property Relief (BPR) is available to reduce the liability to Inheritance Tax (IHT) on the transfer of relevant business assets.

The term relevant business assets specifically includes sole trade/partnership businesses, land/plant and machinery owned personally and used by a partnership or company, shares in an unlisted company and controlling shareholdings in a quoted company.

However, the business activities must not wholly or mainly relate to dealing in securities/stocks/shares/land, or the holding of investments.